Ex-HealthSouth official Leif Murphy recounts being punched by CFO

Former HealthSouth Corp. Treasurer Leif Murphy said today he was sucker-punched by a drunk ex-finance chief as the company unraveled during the accounting fraud that almost sank the company.

Murphy testified on day seven of the Richard Scrushy civil trial in Jefferson County Circuit Court, via a deposition that was videotaped in May 2008. He said he and Martin got into a friendly wrestling match in 1999 at a bar that ended with Martin taking a spill that resulted in a badly swollen cheek. When the shiner was pointed out by a bystander, Murphy said, the volatile Martin erupted and punched him from behind, blindside.

As treasurer and finance department vice president, Murphy has testified he figured out the fraud on his own, and was berated by former Chief Executive Scrushy for pointing it out, all the while thinking he was doing the company a favor. Murphy quit in 1999, and said Martin picked a fight with him at his going-away party. Martin was chief financial officer for part of the fraud period, and is serving a three-year jail term for admitting his part in the bogus accounting.

Shareholders of HealthSouth are suing Scrushy in Jefferson County Circuit Court, saying he treated the company's money as his own and directed the finance department to falsify earnings to boost the stock price and trigger executive bonuses. The shareholders, represented chiefly by lawyers from Birmingham's Hare Wynn Newell & Newton and Galloway & Somerville, are seeking $2.6 billion in damages.

Scrushy's lawyers don't dispute the fraud, but say manipulative subordinates conducted it and skillfully hid it from the boss.

The lawyers for Scrushy, led by Birmingham attorneys Jim Parkman and Jack McNamee, are attempting to create doubt about the reliability of witnesses who have implicated Scrushy. Murphy is one of six high-ranking HealthSouth executives who have tried to pin the fraud on the former boss.

The Jefferson County case is a bench trial by consent of the parties, meaning there is no jury. The verdict will be decided by Judge Allwin Horn. The suit was filed by HealthSouth shareholders on behalf of the company. Any monetary damages would be paid to HealthSouth, not individual shareholders.